Worker cooperatives are a great way to bring democracy into the workplace. For retiring business owners and entrepreneurs, converting to a worker-owned co-op can also strengthen business and generate a return on investment.

Worker co-ops can be built from scratch or created by converting existing businesses. Melissa Hoover, executive director of the Democracy at Work Institute(DAWI), says that co-op conversions are a promising source for new cooperatives. They already have customers, assets, and employees, which makes converting less risky than a startup. She also notes that converted co-ops are among the most passionate members of the U.S. Federation of Worker Cooperatives.

“They’re the most engaged and the most attentive to the cooperative forum, principles, and movement building,” she says. “To change something into a cooperative structure they had to educate themselves about what that meant, and connect themselves to movement organizations, models, and peers.”

When converting an existing business into a co-op there are lots of questions that need to be answered. How will the business be structured? How long will the transition be? Does the selling owner want to stay on? It takes time to work out the details, and answering questions is an essential part of the transition.

Every business has unique strengths and challenges, and there is no single way to create a cooperative. But there's no need to reinvent the wheel either. Hundreds of businesses have followed these five steps to become a worker-owned co-op.

How it’s done

Shareable spoke with Joe Rinehart, the cooperative business developer at the Democracy at Work Institute (DAWI), to learn how to go from thinking about a conversion to actually doing it. Rinehart used DAWI's conversion timeline to layout an overview of what a typical conversion might look like.

It’s not a hard-and-fast template. Some of the steps overlap, some may be unnecessary, and the timeline will vary depending on how large the company is, how long the selling owner plans to stay involved, how much training is required, and more.

This stage is to get the ball rolling, and for the business owner to decide if they’re interested in converting. It’s also about educating everyone involved about the cooperative model and determining if there’s interest in becoming a co-op. According to Rinehart, this is best done as a facilitated conversation with a skilled co-op transition professional. If there is commitment on both sides, the next step is organizing the key players and moving the process forward.

Rinehart recommends building a participatory workplace as soon as possible. This can be done through practices like open book finances and letting employees have input in redesigning workflow.

“As you create a structure of participation you’re letting employees know they have a voice,” says Rinehart. “It’s a really powerful tool in creating a workplace that can transition.”

Stage 2: Employee training and business valuation

What it entails: financial training for employees, business and industry training, cooperative trainings for employees, business valuation process, determine financing options, review and revise current business plan.

This stage is where investment in the transition occurs. Employees receive training so they can understand the finances of the business, the business is evaluated, and financial options are presented. Rinehart recommends having a professional determine the value, then give employees the opportunity to contest the valuation if need be.

This is critical for the owner and employees. This step creates a structure for moving forward, and gives employees an opportunity to debate the valuation so they don’t feel like they’ve been taken advantage of down the line.

Stage 3: Defining structures

This is where the management plan for the transition and post-transition is laid out, and those in management positions are trained.

Rinehart says that in most conversions the existing management structure is left in place and documented. At this point, everyone should be very clear what the rules are, and if they don’t like the rules they have a voice in changing them.

“The [worker-owners] know how to make the business better,” Rinehart says. “They have knowledge about the industry and the business. They know the impact of their decisions.”

Stage 4: Finalize the transition

What it entails: transfer business ownership, negotiate final price, seek financing, complete the transaction, elect new board, and transfer management as necessary.

This stage is all about dotting your I’s and crossing your T’s. It’s where you find the financing and pull the deal together. You will elect a board and have a first board training.

“It’s about making sure everything is done legally, clearly, and carefully so you’re able to move on,” says Rinehart. “You close the door on the transition and effectively move forward as a business.”

Stage 5: Follow through and monitoring

What it entails: ongoing training with current employees.

Once the worker co-op has been launched, it’s important to have regular check-ins about the business to maintain clear and open communication. The structures put in place are not only for current employees but for future employees too. Make sure there are processes in place for training employees in what it means to be a cooperative and that you also lay out plans for growth. All of this requires ongoing training and monitoring.

“No structure is perfect,” says Rinehart. “You’re designing a human technology for participation and democratic ownership. No technology is perfect the first time out the door.” He adds that you’ll want to take time to evaluate it, refine it, and get help from people who are experienced with worker cooperatives. Among those are the DOWI and its associated organization the Democracy at Work Network, other cooperatives, cooperative developers, and members of Cooperation Works.

The Big Picture

Worker-owned cooperatives, whether created from scratch or converted from existing businesses, are a central part of the sharing movement. As Hoover says, they’re the “original sharing platform.”

For those considering converting to a co-op, Hoover recommends talking with other business owners who have converted. She also encourages business owners to think about what they really want to build, and what they want their business to be after they’re gone.

Cat Johnson wrote this article for Shareable.net. Cat is a freelance writer focused on community, the commons, sharing, collaboration and music. Publications include Utne Reader, GOOD, Yes! Magazine, Shareable, Triple Pundit, and Lifehacker.

3.8
·

1

User Ratings

92 minHumanity is more than ever threatened by its own actions; we hear a lot about the need to minimize footprints and to reduce our impact. But what if our footprints were beneficial? What if we could meet human needs while increasing the health and well-being of our...

87 minWithin Reach explores one couple's pedal-powered search for a place to call home. Mandy and Ryan gave up their jobs, cars, and traditional houses to 'bike-pack' 6500 miles around the USA seeking sustainable community. Rather than looking in a traditional neighborhood, they...

65 minEconomic globalization has led to a massive expansion in the scale and power of big business and banking. It has also worsened nearly every problem we face: fundamentalism and ethnic conflict; climate chaos and species extinction; financial instability and unemployment. There...

18 min5,435 views today · "This video essay is about a gendered trope that has bothered me for years but didn’t have a name, so I gave it one: Born Sexy Yesterday. It's a science fiction convention in which the mind of a naive, yet highly skilled, girl is written into the body of a mature sexualized...

John Pilger2,414 views today · Why has so much journalism succumbed to propaganda? Why are censorship and distortion standard practice? Why is the BBC so often a mouthpiece of rapacious power? Why do the New York Times and the Washington Post deceive their readers?
Why are young journalists not taught to...

Films For Action2,186 views today · Now that there are thousands of films on Films For Action, we realized the very best gems have really become buried all across our library, and for people new to this information, we needed a more guided way to dive in. Spread across 15 core themes, this collection aims to be...

Jamie Smolen1,926 views today · For many, the holidays are indeed the most wonderful time of the year. Families and friends come together and enjoy food, good cheer – and, often, alcohol.
Commercially speaking, alcohol and the holidays seem to be made for each other. Alcohol can be a quick and easy way to...

4 min1,154 views today · "The world is missing what I am ready to give: My Wisdom, My Sweetness, My Love and My hunger for Peace."
"Where are you? Where are you, little girl with broken wings but full of hope? Where are you, wise women covered in wounds? Where are you?"

David Bollier825 views today · Even though Creative Commons licenses have been around for more than a decade, I am always surprised to learn that many progressive-minded activists, artists and academics – the people who should be most enthusiastic about the licenses – know nothing about them or at least...

4 min569 views today · When wolves were reintroduced to Yellowstone National Park in the United States after being absent nearly 70 years, the most remarkable "trophic cascade" occurred. What is a trophic cascade and how exactly do wolves change rivers? George Monbiot explains in this movie...